Court resources are scarce. This is a universal truth, although no one seems to have cracked the code that will solve the problem.

The answer may be as simple as alternative dispute resolution. Sensible commercial parties have always engaged in ADR and more and more jurisdictions around the world are promoting a culture where you can’t expect your day in court until you have tried to sort out your dispute yourself.

But can ADR really be forced on to potential litigants?

Although ADR has been promoted in different ways in different countries, the aim has always been the same – to reduce legal costs, increase efficiency, bring about a cultural change and free up limited court resources.

Each jurisdiction’s policies and procedures have had a common theme – to try to force parties to resolve their own disputes, including by:

• filing statements that outline what steps the parties have taken to resolve the dispute;
• limiting the circumstances in which a party can reject an invitation to mediate;
• requiring parties to disclose critical documents early; and
• ordering parties to participate in non-binding ADR.

Places like Hong Kong, the United Kingdom and, indeed, various Australian state courts have followed a ‘practice directions’ approach. Australia’s Federal Government, on the other hand, has decided to adopt a legislative option.

In response to key recommendations made by the National Alternative Dispute Resolution Advisory Council in its 2009 report The Resolve to Resolve , Australia’s Federal Government introduced the Civil Dispute Resolution Bill into the Parliament on 16 June 2010.

The Bill proposes that any applicant commencing proceedings in the Federal Court or Federal Magistrates Court in relation to a civil dispute (with some exceptions) and any respondents to those proceedings must file a ‘Genuine Steps Statement’.

The applicant’s Statement must include the steps taken to try to resolve the dispute, or why no steps have been taken. The respondent’s Statement must either agree with what applicant has stated, or disagree and provide reasons.

While the Bill does not explicitly define what constitutes a ‘genuine step’, it does set out a number of examples, including notifying the other party of the dispute, offering to discuss the dispute, providing information and documents, considering ADR and attending ADR.

Lawyers who do not advise their client of the requirement to file a Statement may have a costs order awarded against them.

Mandated ADR has been around for a long time, but it still hasn’t been universally adopted. There is always the argument that there will be no genuine change, no cultural shift, and that the parties will simply ‘go through the motions’ because the law says that they must. There is also the risk that costs will be ‘front-loaded’ rather than result in a genuine cost savings.

Australia’s Civil Dispute Resolution Bill has not been enacted yet, and given the current ‘hung’ Parliament we are facing, it may be some time before we know if legislation can be used effectively to address perceived inefficiencies in the civil justice system.

But then again, perhaps we will know sooner than we think, because the Australian state of Victoria is set to go down the legislated path. Its Civil Procedure Bill 2010 (Vic) is more prescriptive than Federal Government’s proposed Civil Dispute Resolution Bill and its pre-litigation requirements include, as a bare minimum, exchanging critical documents early and considering options for ADR.

The Victorian Bill also introduces a new ‘overarching purpose’ for Victorian Courts – to ‘facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute’. Furthermore, new standards of conduct, called ‘overarching obligations’, aim to further the administration of justice in relation to civil proceedings.

In the end, so-called ‘pre-action protocols’ are just another step along the continuum of forcing parties to resolve disputes themselves. The real question is: can legislation and practice directions change the cultural behaviour of litigation, or are we barking up the wrong tree?

The United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules were adopted in 1976, and have been both broadly used and widely praised as simple and straightforward. Remarkably, in 34 years they have not been revised – until now. Revisions were finally approved this summer, and arbitration agreements concluded after August 15, 2010 and referring to the UNCITRAL Rules are presumed to refer to these revised rules, unless the parties otherwise agree. Given the length of time since they were first introduced, significant revisions might have been expected. But in testament to their basic soundness, many of the revisions are little more than tweaks.

The revisions serve three basic purposes. First, they fill in a few holes that have become apparent over the years. Second, some provisions are added to expedite the arbitration process—like adding a requirement that the tribunal establish a “provisional timetable for the arbitration.” Finally, they update the original rules to account for changes in technology. This recap is from front to back, not in order of significance. Some of the most significant changes are noted at the end, so read on!

Notices and Other Communications

The 1976 Rules (Article 2) required notices to be physically delivered, while the 2010 Rules provide that notices and other communications “may be transmitted by any means of communication that provides or allows for a record of its transmission.” E-mails and facsimiles are subject to two special rules. First, the communication is deemed received only if sent to a person specifically designated for receiving such communications. Second, they are deemed received on the day sent, except for a notice of demand for arbitration, which is deemed received on the day it reaches the recipient’s electronic address. Accordingly, you may wish to add a line to your UNCITRAL arbitration clause to designate an individual for receipt of a notice of arbitration, in addition to designating the place and language of the arbitration.

While Article 3 setting out the requirements for a notice of arbitration did not change, a new provision was added clarifying that the constitution of the arbitral tribunal will not be hindered by any controversy about the sufficiency of the notice, and giving the tribunal jurisdiction over such controversies.

Response to the Notice of Arbitration

A response to the notice of arbitration was not previously required, and Article 19 simply required the respondent to provide a statement of defense by a date determined by the tribunal. Article 4 of the 2010 Rules now requires the respondent to respond within 30 days of receipt of the notice of arbitration, with the response to include the name and contact details of each respondent, and any response to the items in the notice regarding the arbitration agreement, the relevant contract, the claimant’s description of its claim and requested remedy, and proposal with respect to the number of arbitrators.

The response may also include any objections to jurisdiction, a brief description of any counterclaims, and a notice of arbitration with respect to other parties to the agreement (beyond claimant). As the language is permissive instead of mandatory, it appears that counterclaims or crossclaims are permitted but not compulsory.

The Appointing Authority

The 1976 Rules contemplate the parties designating an Appointing Authority to assist with the appointment of arbitrators and any challenges to arbitral appointments. The procedures for determining an Appointing Authority are consolidated in Article 6 of the 2010 Rules with a few modifications. The new rules reduce the amount of time one must wait before making a request that the Secretary-General of the Permanent Court of Arbitration at the Hague resolve disputes regarding the Appointing Authority — from 60 days to 30 days. Additionally, asking the PCA to act as the Appointing Authority is now expressly permitted.

The Number of Arbitrators

The 2010 Rules retain the default position of having three arbitrators if the parties fail to agree on use of a sole arbitrator. However, Article 7.2 now provides more flexibility by allowing the Appointing Authority to appoint a sole arbitrator if one of the parties asks for this, or either party fails to appoint a second arbitrator and using just one is “more appropriate” under the circumstances of the case.

Arbitrator Challenges

The 2010 Rules add two innovations. First, a new annex provides a model statement of independence to be provided by proposed arbitrators. Second, a schedule is added for resolving any challenges (the original rules had a deadline for raising a challenge but no timetable for resolution). Per the new Rules, if the appointing party does not agree to the challenge, or the challenged arbitrator does not withdraw, in either case within 15 days, then the challenging party has 30 days from the date of the challenge to pursue it with the Appointing Authority, and otherwise it is waived.

Arbitrator Liability

Article 16 of the new Rules adds a waiver of liability for the arbitrators “save for intentional wrongdoing.” This waiver also applies to the Appointing Authority and to experts appointed by the panel.

Joinder

Article 17.5 now permits the tribunal to allow other parties to the arbitration agreement to be joined, unless the third party would be prejudiced by joinder. This is a significant advance over the prior rules that were silent on the subject.

Arbitral Fees

The 2010 Rules attempt to address the problem of excessive fees by requiring that the fees be reasonable, requiring the arbitrators to explain how they have fixed the fees and costs, and allowing the parties to appeal the fees and costs to the Appointing Authority. Previously, the tribunal members set their own fees, and there was no real provision for oversight, since UNCITRAL arbitration is non-administered. This addresses one of the most common criticisms of non-administered arbitrations generally.

Andrew Ness
William DeVan

In comparison to the Western world, business culture in Russia is more often than not one of confrontation and of mutual tests of strength, especially in the construction sector. Hence the important volumes of court decisions carrying the authority of res judicata to settle a dispute, while alternative dispute resolution (ADR) methods such as mediation relying on the parties’ bona fide have been much less used so far.

In this regard, the recent adoption on July 27, 2010 of Federal Laws 193-FZ and 194-FZ improving the legal regime of Mediation (the Mediation Laws) can be seen as a bold and satisfying legislative move to complete the legal framework of ADR in Russia and stimulate the use of these methods (the arbitration legal regime has indeed been settled for long already by Federal Laws of July 7, 1993 and July 24, 2002). These Mediation Laws will come into force on January 1, 2011.

Initiated several years ago by the Chamber of Commerce and Industry of the Russian Federation (CCIRF – http://www.tpprf-arb.ru/en/2010-01-13-20-37-26en/centerabouten) on the basis of the United Nations Commission on International Trade Law (UNCITRAL) 2002 model, the original mediation bill has been revamped earlier this year under the authority of the Russian President Dmitri Medvedev himself, bringing further enhancements (http://kluwerarbitrationblog.com/blog/2010/03/19/russian-president%E2%80%99s-bill-draft-law-on-mediation-%E2%80%93-is-a-new-epoch-of-adr-beginning-in-russia/comment-page-1/).

The most critical improvements of the Mediation Laws to the existing state of legislation are the following:

- anything said by a party during the mediation process cannot be used in litigation or arbitration at a later stage. This fundamental principle of mediation is now clearly provided for by the Mediation Laws;

- a framework for mediation proceedings is defined, with inter alia a tight maximum timeframe of 60 days for such proceedings (with certain exceptions);

- in order to insure their independence, neutrality and competence, the Mediation Laws provide for specific qualification requirements for mediators (whilst that kind of formal requirements does not exist yet in jurisdictions such as France). There are no provisions for licensing of mediators but they will have to get affiliated to self-regulated organizations (SROs) to be created.

In addition, the Mediation Laws consolidate the current state of legislation on a number of issues. Mediation can thus be initiated before or after a dispute has been submitted to a court or arbitral tribunal. Further, the settlement agreement reached as a result of the mediation can be confirmed by a court or arbitral tribunal, allowing compulsory execution orders. Failing such confirmation, the settlement agreement is considered as a simple civil contract.

Interestingly, ADR methods were imported to Russia earlier in the construction sector than in most other industries. Indeed, the growing involvement of international lenders in large construction projects has triggered the increasing use of international models of contracts such as FIDIC. Such models being structured to avoid disputes to a maximum largely rely on a panel of ADR methods encompassing mediation, dispute boards and arbitration. While dispute boards have rarely been set up in practice to date, independent experts have occasionally been called as mediators on specific construction projects, fulfilling to a certain extent the role of the Engineer under the FIDIC Books prior to 1995.

Although a clear legal framework is now set for mediation in Russia, there is still a strong need for additional factors and catalysers to make mediation become a common practice in Russian business culture, such as:

- a strong network of qualified mediators to allow successful mediation to take place. It is worth noting that many experienced professionals are already present in the Russian construction sector;

- a lobbying from institutions such as the CCIRF to promote mediation in Russia through a proven track record of successful precedents and statistics demonstrating that mediation brings tremendous added value to dispute resolution, such as rapidity, cost effectiveness, and last but not least a chance to pursue business relations – an attractive point for contractors when employers constitute a scarce commodity as in the current context.

It will be therefore interesting to follow the development of mediation in Russia in the next few years. And as the saying goes, an ideal situation in the field of dispute resolution will be achieved only when litigation itself will be considered as an alternative to mediation. Not necessarily a happy perspective for litigation lawyers – but this is still far from sight in Russia!

Whilst interest in the recent UK judgment in the case of City Inn v Shepherd Construction may be confined to these shores, it is sufficiently important in the UK construction arena to warrant a mention on this Blog. The level of interest generated by this case initially may seem disproportionate to the complexity of issues and the amounts of money at stake. But ever since the option to adjudicate became compulsory for all UK based “construction contracts” in 1996 (Under the Housing Grants, Construction & Regeneration Act – see opsi), there has been a distinct lack of relevant construction UK case law on matters such as causation and delay – as parties choose the quicker, cheaper option of adjudication to settle disputes. If you also take into account the duration of this dispute (the project in question was completed in 1999) you can start to see why everyone (at least in the UK) is looking at the latest City Inn judgement.

This judgment from the Inner House of the Scottish Court of Session is therefore very useful as an indication of the UK Courts’ current approach to causation of delay and extensions of time. Of course, this may not be the end of the story as City Inn still has the chance to lodge an appeal to the Supreme Court.

Key Elements

The dispute centred on a late-running project to build a hotel in the city of Bristol. Shepherd was employed by City Inn to carry out this project under an amended version of the 1980 edition JCT contract (a UK standard form of building contract with Quantities). The adjudications which followed the late finish resulted in Shepherd being awarded a 9 week extension of time (”EoT“) made up of 4 weeks awarded by the Architect and a further 5 weeks from the Adjudicator. City Inn was unhappy with this result and took the matter to the Outer House of the Scottish Court of Session. They applied for various orders including
a declaration that Shepherd were not entitled to an EoT; a reduction of the Architect’s award of 4 weeks EoT; and an order for payment of outstanding liquidated damages for delay.

Shepherd counterclaimed for a further 2 weeks EoT and for consequent loss and expense. The matter eventually proceeded to trial and was heard by Lord Drummond Young.

The main elements of the case were a bespoke clause covering entitlement to an EoT (clause 13.8), and the cause of the delay, taking into account the multiple delaying factors which occurred and the extent of their impact.

On the first issue, Lord Drummond Young found that clause 13.8 could not logically apply to instructions which caused delay just because they were in themselves late. Lord Drummond Young also noted that City Inn had not referred to their clause 13.8 rights until this juncture, and that neither of the parties appeared to take the clause into account when acting.

On the second – and more interesting – issue, causation and delay, Lord Drummond referred back to another contract clause (clause 25) to give his judgement. He said that under clause 25 the architect was to exercise his judgment and fix a “fair and reasonable” completion date. He held that an apportionment exercise may be necessary where there is concurrency or no dominant event.

The parties had been unable to locate an electronic, logic linked version of the original programme and so had to use a basic programme showing the activities and durations of the project. Lord Drummond rejected City Inn’s expert evidence which tried to establish, retrospectively, a critical path which led to the conclusion that Shepherd was not entitled to any EoT at all. Instead, he favoured Shepherd’s expert who said that he had attempted to establish a critical path, but that it was impossible to do so accurately. Lord Drummond preferred this common sense approach and found that, using this analysis, Shepherd was entitled to 9 weeks EoT.

City Inn appealed unsuccessfully with most of the judgment concurring with Lord Drummond’s reasoning. The majority opinion was set out by Lord Osborne, and contains five principles relating to the evaluation of a delay and loss plus expense claim. Of course, the Court was examining these issues under clause 25 of the JCT form. However, I think these general principles would have relevance to most construction contracts and illustrate the likely approach that would be adopted by the UK Courts:

1. For an EoT claim to succeed the relevant event must be shown to be likely to cause delay or have caused delay.

2. Whether or not a relevant event causes delay is a matter for common sense.

3. It is for the decision maker to decide what evidence to use in forming his conclusion. This may or may not include a critical path analysis. What matters is that the evidence used is sound, whatever form it takes.

4. If there is one dominant cause, all other causes will be disregarded. The dominant cause must be a relevant event for a claim to succeed.

5. It is for the decision-maker to apportion the delay to completion of works in a “fair and reasonable way” where there are two (or more) causes of delay, but only one of which is a relevant event and neither is dominant.

Although Lord Calloway dissented from the ‘apportionment’ reasoning, all three judges concurred in the result and on the critical path analysis being relevant but not necessary to decide the outcome of an EoT claim.

Implications for future cases

I should have of course stressed that this was a Scottish Judgment. What this means is that the decision is binding on the lower courts of Scotland but not so on the English courts – although given that it is an appeal court decision it will at least be persuasive in England.

What is most striking is that all the judges leaned heavily towards the arguments for being guided by principles of fairness, reasonableness and common sense. Many of the arguments put forward centred on the true meaning and consequences of events being concurrent. However, Lord Osborne stated that the important question was not whether events were truly concurrent, but rather the effects on the completion date of the events. In a similar spirit, Lord Carloway talks about the Architect applying “professional judgment” and “using his and not a lawyer’s common sense“.

In terms of implications for future cases in the UK, the judgment must not be considered an approval of the use only of common sense and fairness at the expense of a critical path analysis. In this case the critical path analysis presented was not considered sound and so was not used to form the judgement. However, that is not to say it may never be used to determine EoT claims, but rather it is up to the decision-maker as to whether he uses the critical path analysis in his “fair and reasonable” decision-making process.

And what of its implications further afield – in the international arena? I think the judgment and the arguments employed would be useful to anyone involved in disputes on causation and EoT’s where there are concurrent events and particularly where there is no critical path analysis or such evidence is flawed.

FIDIC talks about the Engineer making a “fair determination” whenever required to determine any matter under the Contract [Sub-Clause 3.5] and the provision dealing with extensions of time [Sub-Clause 8.4] refers to an extension of time “if and to the extent that completion……..is or will be delayed by any of the [specified] causes“. So the same arguments about causation, apportionment and concurrency could run under a FIDIC based contract.

Similarly, the NEC construction form NEC3, which treats delay events as “Compensation Events”, requires the Project Manager (who has to act “as stated in this contract and in a spirit of mutual trust and co-operation”) to assess “the length of time that, due to the compensation event, planned Completion is later than planned Completion” [Core Clause 63.3]. Interestingly, in NEC, assessment of the impact of the event includes “risk allowances for cost and time for matters which have a significant chance of occurring and are at the Contractor’s risk under this Contract” [Core Clause 63.6].

And, of course, I cannot sign off without mentioning that Pinsent Masons acted for Shepherd Construction on this case!

When an Owner comes after the Contractor for liquidated delay damages (LDs) after a project is completed late, the Contractor’s only substantive defense is to argue that the delay was excused by force majeure or Owner actions (naturally there may be procedural defenses, like timeliness). However, a recent decision by the United States Court of Federal Appeals for the Federal Circuit has erected a new requirement that the Contractor must first fulfill before it can assert its substantive defense. The decision in question is M. Maropakis Carpentry, Inc. v. United States, ___ F.3d ____, No. 2009-5024 (June 17, 2010). It holds that in order to dispute the basis for an LD assessment by the U.S. Navy, the Contractor first had to submit a certified claim for a time extension. No time extension claim = no defense to LDs.

After finishing the project 467 days late, Maropakis had sent letters asking for a time extension but failed to turn them into a formal, certified claim. Maropakis then brought a claim against the Navy for the unpaid contract balance, which the Navy had withheld as partial payment for claimed LDs. The Navy counterclaimed for the full 467 days of LDs. The court granted summary judgment on the Navy’s counterclaim, on the basis that since Maropakis had never formally sought (in the form of a certified claim) a time extension, the court had no jurisdiction to consider such a claim in defense of the LD assessment. The trial court agreed, as did the Federal Circuit on appeal.

The Federal Circuit’s ruling on appeal was as follows: “we hold that a contractor . . . must meet the jurisdictional requirements and procedural prerequisites of the CDA [Contract Disputes Act-the U.S. law that requires claims to be certified before they can be litigated], whether asserting the claim against the government as an affirmative claim or as a defense to a government action.” The Court saw no reason to distinguish between affirmative claims and matters of defense to government claims in applying the requirement for a certified claim prior to litigation, at least when the defense would involve an adjustment to the contract terms, as in the case of a time extension.

The dissenting opinion argued in vain that there is a clear distinction between presenting an affirmative claim for relief, where claim certification is required, and simply defending against a government claim, where no affirmative relief is sought.

The simple lesson of Maropakis is that whenever completing a U.S. government contract late, it is vital to submit a formal claim for a time extension so as to preserve your right to dispute a possible LD assessment (which may not come for several years). There are also two broader concerns. First, this is another brick in the wall of recent decisions by the Federal Circuit hostile to the position of Contractors. Contractors should be learning that they are not dealing with a tribunal at all inclined to give them the benefit of the doubt. Second, developments in the law relating to U.S. government contracts frequently spread to the U.S. private sector. Where private contracts require some sort of formalities associated with asserting a claim, the Owner may raise similar arguments, seeking to bar any ability to dispute its later assessment of LDs when the claim formalities were not followed to seek a time extension.

Andrew Ness
Christian Henel

First for the “Lean” – the Singapore International Arbitration Centre (SIAC) Rules 2010 came into effect on 1 July 2010.

This third edition replaces the SIAC Rules 2007 and is part of SIAC’s efforts to stay lean and effective as it keeps apace with the rapid growth of international arbitration.

Key updates include an expedited arbitration procedure for claim amounts less than S$5 m or in cases of exceptional urgency. The expedited process requires an award to be issued within six months from the tribunal being constituted and the reasons for the award may be in “summary form” under the expedited procedure.

Also new to the Rules are the inclusion of a new rule on interim and emergency relief through an Emergency Arbitrator prior to the constitution of tribunal.

The Rules also establish an SIAC committee to decide on jurisdictional challenges to the arbitrator when the other party does not agree to a challenge to the arbitrator and the arbitrator being challenged does not withdraw voluntarily within 7 days of notice of challenge.

Added teeth have been added to provide additional protection of confidentiality as the tribunal may impose sanctions for breach of confidentiality obligations.

A key change to the 2007 Rules was the introduction of a Memorandum of Issues to be drawn up between the parties. This has now been removed in the new 2010 Rules.

With the growing popularity of international arbitration as a dispute resolution option, the robustness and flexibility of the amended SIAC Rules have offered a timely change when choosing SIAC as the administrating body for arbitration in Singapore.

The “greening” of equatorial Singapore sounds a bit odd until you realise that it refers to the Garden City’s buildings. Singapore has emerged as one of the more aggressive governments within the Asia-Pacific region in its pursuit of a green building program.

The Building Construction Authority (BCA) Green Mark certification scheme introduced in 2005 allowed developers till 2008 for the mandatory Green Mark scoring as part of Building Plan submissions and applications for Temporary Occupation Permits.

The certification comes with financial incentives as the BCA awards higher Gross Floor Area values for higher-tier Green Mark ratings.

Amongst the checklist items are efficient design for natural ventilation and lighting. Interestingly, points are also given for adjusting mechanical ventilation requirements in car-parks vis a vis CO sensors.

Heat transmitted from the roof is taken into account. Aesthetically, this has not been a bad thing with the creative use of roof gardens by developers. Even water efficiency toes the “green” line with rainwater diverted to landscape irrigation and bonus points given for using renewable energy from solar power or wind.

It’s been a testament to the BCA’s efforts that by May 2010, there are now 450 green buildings in Singapore with a total floor area of 16 million square meters or 8 percent of Singapore’s Gross Floor Area.

Other initiatives include a CleanTech Park (CTP) to be developed from July this year. The “green” themed business Park is expected to complete in 2030 with 20,000 people in 30 “living laboratory” buildings. These include “clean-tech” companies to commercialise green urban solutions for Singapore and the Asia-Pacific, along the same lines as Masdar City in the UAE.

The legal services landscape in Singapore is changing as well with the introduction of a new Joint Law Venture on the scene in the form of Pinsent Masons MPillay LLP, granted a JLV license in July this year by the Attorney-General’s Chambers.

Thomas Edison once said “Everything comes to him who hustles while he waits” – It’s an apt description of the association between Pinsent Masons and MPillay as the two entities patiently operated closely with each other for three years, by way of a formal association, from 2007 before obtaining their JLV license.

The pairing of the two entities through the JLV will allow a full range of service offerings as a “one-stop shop” option for clients, combining Pinsent Masons’ widely acknowledged international expertise with MPillay’s award winning in-depth local knowledge and experience.

As the sixth JLV in Singapore, it won’t be the first JLV but it will certainly be unique in its dedicated focus on the construction, engineering and energy sectors.

So some interesting and I believe positive developments for the Singapore legal environment in signing off this “Lean Green Venture” story.

Mohan R Pillay
Managing Partner, MPillay
Chartered Arbitrator
Adj. Assoc. Prof., Faculty of Law, Nat. Univ. of Singapore
Visiting Professor, Centre of Construction Law, King’s College London
16 Collyer Quay #22-02
Singapore 049318
E: mohan.pillay@mpillay.com

Disputes in the construction industry have historically lent themselves to the utilisation of alternative dispute resolution (ADR) processes. During the boom times of the late nineties and early noughties, parties to construction contracts focussed less on hard dollar contracts and strict legal claims, and more on relationship based contracting and dispute avoidance, such that reliance on more formal ADR fell away.

With the return of more difficult times, ADR has again come under the spotlight. It seems widely accepted that arbitration in the domestic arena in Australia has become largely undistinguishable, in terms of time and money spent resolving disputes, from litigation.

Meanwhile, international arbitration has also been under scrutiny across the globe. In 2006, UNCITRAL revisited its Model Law for arbitration and agreed revisions to the Model Law. These revisions have been accepted by the Australian federal government (as discussed below).

Although difficulties with domestic arbitration in Australia are arguably due to the way in which parties, lawyers and courts have interpreted that legislation, Australia has taken the opportunity to overhaul its domestic arbitration regime, and make it consistent with the approach taken in international arbitration.

The International approach

On the international stage, Australia is intent on becoming a hub for international arbitration. To this end, a dedicated Australian Disputes Centre opened in Sydney this year, and the Australian Government last month updated the International Arbitration Act (Cth) 1974 (IAA), to adopt the 2006 revisions to the Model Law. Australia is the fifth country to do so – following in the footsteps of Peru, Mauritius, New Zealand and Slovenia.

In the context of announcing the amendments to the IAA the Attorney-General, the Hon. Robert McClelland MP, highlighted the aim of the amendments is to

‘emphasise the importance of speed, fairness and cost-effectiveness in international arbitration, while clearly defining and limiting the role of the courts in international arbitration without compromising the important protective function they exercise’.

To achieve these aims, the amendments to the IAA focus on clarifying matters of application and judicial interpretation and incorporating the greatest possible choices for parties to resolve their dispute. In summary, the amendments to the IAA:

1. provide increased protection for foreign awards by providing that a court may only refuse to recognise and enforce an arbitral award if one or more of the specific grounds listed in the IAA is satisfied;

2. provide clarification to the courts by inserting a new objects clause (which emphasises the important role arbitration plays in facilitating international trade and commerce) and a new interpretation clause (which requires a court to consider the objects of the Act, including that awards are intended to provide certainty and finality);

3. remove the parties’ previous ability to opt out from using the Model Law;

4. include a regime for interim binding orders to protect the rights of a party and maintain the status quo, preserve assets or preserve evidence (although Australia has not adopted the Model Law to the extent it allows for applications for interim order to be brought ex parte);

5. provide the parties with more flexibility by showcasing a range of optional provisions to govern their dispute (such as seeking assistance from a court in the form of a subpoena);

6. include a framework/regime for protecting confidential information; and

7. give the arbitral tribunal greater scope to limit the costs of an arbitration.

The Domestic approach

Each Australian state and territory has legislation allowing for commercial arbitration. In tandem with updating the IAA, the Standing Committee of Attorneys General have developed a ‘Model Commercial Arbitration Bill’, to bring Australia’s domestic arbitration regime in line with international expectations and law, and to achieve greater consistency between the commonwealth and state laws.

The Model Commercial Arbitration Bill largely adopts the Model Law. This acknowledges the greater success of international arbitration legislation.

If the Model Commercial Arbitration Bill is adopted throughout Australia, the business community and practitioners alike will no longer be required to have knowledge of two arbitral systems (one for domestic disputes and another for international disputes). This will assist in increasing both Australian and overseas businesses’ familiarity and confidence of Australian arbitral processes within Australia.

New South Wales has been the first to adopt the Model Commercial Arbitration Bill, by replacing its Commercial Arbitration Act (NSW) 1984 with the Commercial Arbitration Act 2010, which was passed in late June 2010. The NSW Act largely accepts the Model Bill but there are some notable differences, for example the NSW Act does not include a power to stay court proceedings. These differences make the NSW Act more consistent with international arbitration law and advance the object of arbitration.

The future

It remains to be seen whether the other states and territories will adopt the Model Commercial Arbitration Bill (and hence the Model Law), and whether or not they will make any amendments to it in doing so. Assuming the laws are adopted throughout Australia, it will be a matter of time to see whether the parties to disputes have confidence that arbitration has again been put in the position of being a viable alternative to litigation.

The U.S. Supreme Court has been deciding cases regarding arbitration at (for them) a furious pace recently, and the latest decision (Rent-A-Center West, Inc. v. Jackson, 2010 WL 2471058 (June 21, 2010)) reconfirms the Court’s continued strong support for enforcing arbitration agreements as written, even where this deprives the courts of any significant role in determining threshold questions of arbitrability.

The Rent-A-Center decision is complex, and well illustrates the very fine distinctions being made in the U.S. law of arbitration, but which have the net effect of strengthening the arbitrators’ role at the expense of the courts. The underlying broader issue is whether it is for the arbitrators or the courts to decide questions going to whether there is in fact a valid contract and a valid agreement to arbitrate (so called “arbitrability” or “gateway” questions). Under the longstanding Prima Paint rule, a challenge to the validity of the entire contract (including, but not specifically directed at, the arbitration clause) is to be decided by the arbitrators. But a challenge specifically to the validity of the agreement to arbitrate, or as to whether that arbitration agreement covers a particular dispute, is normally for the courts to determine. This, however, can be altered by the parties if they “clearly and unmistakably” demonstrate their intent to delegate such gateway questions to the arbitrators.

In Rent-A-Center, a former employee (Jackson) sued his former employer (Rent-A-Center) for employment discrimination. Rent-A-Center sought dismissal in favor of arbitration, based on an arbitration agreement signed by Jackson at the outset of his employment. That agreement (which covered only arbitration; other employment terms were in other documents) not only specifically provided that discrimination claims were to be arbitrated, but contained a separate “delegation” sentence giving the arbitrator “exclusive authority to resolve any dispute relating to the . . . enforceability . . . of this Agreement.” Jackson countered by asserting that the agreement to arbitrate was unconscionable and thus unenforceable.

The Supreme Court resolved the dispute in favor of arbitration by, in effect, extending the Prima Paint rule. It held, by a 5-4 margin, that since Jackson’s challenge to the enforceability of the arbitration agreement went to the entire arbitration agreement, and not specifically to the “delegation” sentence, then it was up to the arbitrator to determine the unconscionability challenge to the enforceability of the arbitration agreement. It was not a matter for the court to decide. This extension of the Prima Paint concept thus appears to further narrow the situations where the court gets to determine “gateway” issues, at least if the arbitration agreement is worded so as to delegate gateway issues to the arbitrators.

The lesson for construction practitioners is thus that the particular wording of the arbitration clause, and how, if at all, it delegates the arbitrators to determine arbitrability issues, is more important than ever. The specific wording, if deemed “clear and unmistakable,” may indeed immunize the parties from any scrutiny by the court of all but the narrowest and specific of challenges to the clause’s enforceability.

Andrew D. Ness

Arbitration has long been established as a method of dispute resolution in the Middle East. In recent times, with the enormous economic growth experienced in the region, and the UAE’s liberal approach to foreign investment, the provision for solving disputes by arbitration has become even more prominent in commercial contracts, aided in part by the fact that it is the favoured method of resolving disputes under many standard form construction contracts.

The UAE has been a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, commonly known as the “New York Convention”, since 1996, but there is currently no federal legislation in force that is solely concerned with arbitration. The legislative provisions that presently apply to arbitrations in the UAE are Articles 203 to 218 of UAE Federal Law No. 11 of 1993, Issuing the Law of Civil Procedure, usually referred to as “the Civil Procedure Code”. A separate law relating to arbitration is in place in the DIFC Free Zone.

The UAE Federal Government, in a move aimed at enhancing investor confidence, has announced that a new Federal Law governing arbitration (”the New Arbitration Law”) throughout the Emirates is to be passed in the near future, with reports suggesting this will happen later this year.

Given that the law is presently still in draft form (”the Draft Arbitration Law”), it is entirely possible that there will be further modifications and refinements made before the Draft Arbitration Law is issued. However, an unofficial English translation of the Draft Arbitration Law was circulated at the recent Draft Arbitration Law Conference held in Abu Dhabi.

The Draft Arbitration Law that we have had the opportunity to review is not a direct reproduction of the UNCITRAL Model Law (”the Model Law”), but it appears that the drafters have had regard to the provisions of the Model Law in preparing the Draft Arbitration Law.

Some of the notable features of the unofficial English translation of the Draft Arbitration Law currently in circulation are:

1. The arbitration agreement is separate from the rest of the contract. Termination, dissolution or the invalidity of the contract, will not affect the validity of the arbitration agreement (Article 11(4)). This confirms that the view taken of arbitration agreements in many overseas jurisdictions will also apply in the UAE.

2. The arbitration agreement is required to be in writing (Article 12). It is worth mentioning that the Draft Arbitration Law goes beyond the Model Law and includes a provision that the arbitration agreement will be considered to be in writing if it is mentioned in written communications between the parties, including an email letter in accordance with the applicable rules of electronic transactions.

3. In the event the parties cannot agree on the number of arbitrators to be appointed, then the dispute shall be determined by a tribunal of three arbitrators (Article 16 (2)).

4. Either party, or the tribunal, may request the relevant local court to pass judgment on a witness who fails to attend or refuses to give sworn evidence or answer a question without legal justification. Similarly, the court may be asked to require a third party to provide any documents in their possession. (Articles 36 and 37).

5. The tribunal may issue interim awards (Article 43).

6. Where there is no agreement on the time period within which an award must be delivered, the tribunal is to deliver the award within six months of the first session, but the tribunal may, of its own volition, extend the period for delivering the award by up to 6 months (unless the parties agree to a longer extension) (Article 44). This differs from the current requirement under the Civil Procedure Code that the arbitration be completed within six months of the first session (unless the parties have stipulated a different period, or agree to extend the period of the arbitration).

While only time will tell what form the New Arbitration Law will take, it appears that the new law will be a more comprehensive piece of legislation than that which currently exists, and will take a form familiar to parties experienced in international arbitration given the regard had to the Model Law.

By Sachin Kerur and Jeremie Witt